S&P Case-Shiller Index: San Francisco Single-Family Home Values

Having ticked up 0.3 percent in November, the Case-Shiller Index for single-family home values within the San Francisco Metropolitan Area slipped 0.2 percent at the end of the year, recording the first negative mark for a December since 2011. That being said, the index remains 10 percent higher versus the same time last year and has gained 61 percent since January 2010.

And while the top-third of the market dragged the overall index down, having dropped 0.7 percent in December, the bottom third of the market gained 1.0 percent and the middle third eked out a 0.2 percent gain.

Single-family home values for the bottom third of the market in the San Francisco MSA have more than doubled since 2009 and are now back to December 2004 levels but remain 19 percent below their August 2006 peak. The middle third is back to February 2006 levels but remains 1 percent below a May 2006 peak. And while home values for the top third of the market have slipped from November’s all-time high, they remain 14 percent above the previous cycle peak recorded in August of 2007.

San Francisco condo values gained 0.6 percent in December, reversing a two-month slide. And while the index remains just below the all-time high set in September, it’s 11.0 percent higher versus the same time last year and 17.1 percent higher than in October 2005 (the previous cycle peak).

S&P Case-Shiller Condominium Value Index

The index for home prices across the nation gained 0.1 percent in November and is running 5.4 percent higher on a year-over-year basis but remains 4.9 percent below its July 2006 peak.

Our standard SocketSite S&P/Case-Shiller footnote: The S&P/Case-Shiller home price indices include San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the “San Francisco” index (i.e., greater MSA) and are imperfect in factoring out changes in property values due to improvements versus appreciation (although they try their best).

66 thoughts on “High-End Bay Area House Values Slip While the Bottom Third Gains”
      1. Well, in early 2012 I missed out on a multi-unit building NV that has doubled in value since. I am almost certain I will not see these prices again. Buying today? It’s a flip of a coin.

        1. It’s not a flip of a coin. If you are going to hold for more than like one year you are guaranteed to see appreciation,

  1. This is probably the most accurate picture of the current market conditions:

    – top segment is feeling the hit in stock markets and tech devaluations.
    – mid and bottom of market are still going strong as high job numbers persist and the alternative of renting remains unattractive.

    @socketsite: what is the price threshold for mid and bottom of market housing and how has it changed over time?

    1. I’m expecting 3.5%- 5%+ cumulative appreciation this year in SF.. and 10%-15% cumulative appreciation over the next 3 years. We’re in a new market cycle.. a “slowdown” with rising inventory is natural after a historic 4 year rebound. If the stock market stabilizes to levels lower than last year, we’ll see the real estate market soften across the board later in the year. However i don’t believe the stock market impacts all price tiers here in SF/Bay Area- primarily impacts $2M-$5M range imo. Everything under $1.5 – $1-8M range will remain active from incredibly attractive borrowing options and our strong local job growth. The high end properties/buyers ($5M+) here locally won’t be as impacted by a declining stock market, as the the “top 1%” are typically less dependant on the stock market’s movements with their wealth spread out.

      1. And when ‘strong local job growth’ runs headlong into the brick wall of collapsed VC funding?

        I’ve heard this song before. At least twice.

    2. Despite what you might have read misreported elsewhere, the price tiers are not based on current market values. The tiers are based on the prices which were paid for the properties in years past in order to isolate the performance of the top, middle and bottom thirds of the market.

      The median sale price for a Bay Area home, not house, is currently $625,000.

  2. NY Metro and SF Metro are really the winning regions in this current growth cycle.

    As I have said many times before, the Y2K meeting point downplays SF’s dominance. in 2000 SF had already grown much more than LA or NY. Having the meeting point in 1995 would have SF surpassing LA by probably an extra 30 points.

        1. No, but literally tens of thousands of other jobs at other companies are at risk. Uh, there is much, much much much more to tech and internet in the Bay Area than the big companies you just mentioned. And Santa clara county has far, far more jobs than SF.

          1. Santa Clara County has about 50% more jobs than SF, roughly 1+ million jobs are located in SC and 2/3 million in SF. Santa Clara and San Mateo counties combined have more than twice as many jobs as SF. SC has had more jobs than SF for 40+ years, more superfund sites too. Find the cost of freemarkets, buried in the ground. Mother earth will swallow you, lay your toxins down.

            And yes, SC has more jobs at risk from a tech downslide than SF. They have ~5x as many high-tech jobs as SF, though a much smaller percentage are dependent on VC financing. Same for SM county, which also has more tech jobs than SF.

          2. Find the cost of freemarkets, buried in the ground. Mother earth will swallow you, lay your toxins down.

            Nice CSN reference. But the reference stops there. Tech is not a plight or a plague or a necessary evil. It’s a force for change (either good or bad) and we happen to be at the core of this revolution.

          3. But there are some correlations hidden here.

            Who is more likely to stretch on rent payments or a home purchase? Some big company lifer? Or someone who’s gambling on his/her startup being the next big thing? Especially if they see a large paper valuation of their equity stake?

            The rational risk management solution would be to balance out a high risk job with low risk housing and vice versa. But that’s not how people act. Some folks are gambling types who are drawn to the high risk options that bubbly times provide. Someone who’s prone to believe a charismatic CEO’s tales of soon to be achieved double digit yearly growth is also prone to believe a fast talking realtor’s breathless expectation of home price appreciation.

            San Francisco has been a boom-bust town since the gold rush. Of course maybe this time is different.

          4. SFs, of course technology isn’t good or evil. Those aren’t attributes of a semiconductor fab plant or a drill rig. Those are attributes of people. Some (evil) people knowingly own, operate, license, or use technology in ways that harm the environment and other people. We are still paying to clean up the toxins from 50-150 years ago along the SF waterfront. Many of the most prominent tech companies and great fortunes of Silicon Valley have a disgraceful (perhaps evil) toxic legacy.

            “Silicon Valley is home to one of the nation’s heaviest concentrations of toxic-waste sites….Many toxic sites in the region are a byproduct of local operations like semiconductor manufacturing that flourished in the 1970s and 1980s, says Jim Blamey, hazardous materials program manager for the Santa Clara County Department of Environmental Health.

            While semiconductor manufacturing has since largely moved offshore, “the legacy is still here,” says Mr. Blamey.

            Overall, Santa Clara County has 23 National Priority List sites—the sites eligible for financing from the Superfund, a federal cleanup program for abandoned toxic sites—the most in the nation” — WSJ (namelink)

          5. More likely 8+%, with a multiplier of 4-5, according to SPUR and Bay Area Council. And it was only 4% at the peak of the dotcom boom. Without the billion a month in VC funding for SF tech over the last few years, there would be a lot less artisanal bread bakers and chocolate and cupcake makers. A lot less need for Uber drivers, and other services including RE agents as well. Oh, and tech firms occupy 20-25% of all office space in SF, according to SPUR. A BFD, as Joe Biden would say.

  3. Why is the high end coming down first? Because very wealthy people have access to the best financial advice. And that advice is telling them “don’t buy at the top of the market”.

    1. There are a few forces at play: free money at the Fed Cash Express, International BRICs who need to park their money, big tech valuations based on lofty expectations, and the good old “constrained supply”.

      Now the money spigot is a bit less open, BRICs are in pain and tech are being looked at more realistically. The last parameter is not going away though. I think we’re due for a correction or maybe 1/2 of the 2009 dip, which was between 20 and 30%. I’d say some stagnation, a dive to -10 or -15% then back on the up curve in 2-3 years.

      1. The last one (constrained supply) can disappear real fast when the layoffs pick up in earnest, combined with an awful lot of new units coming down the pipeline. Remember how many unfinished projects there were 2009-2011, this will be worse. The correction I think will depend on the segment, the high end and District 10 could see 30%, but the 1-2 BR condos in very central locations might get off with 10%.

        1. We recently had the greatest recession since the 1930s and yet rents probably took a 5% hit in 2008 and condos took a 25% hit.

          1. But rents took a really serious hit after the 2000 tech bust.

            The last recession was centered around lending not tech issues.

            And most importantly, that hit was even after an unprecedented intervention to prop up the system. Hard to see how that level of intervention is sustainable.

          2. In the dotcom bust asking rents in SF dropped more than 25% for residential. Commercial rents dropped ~50%. The recent recession had much bigger impact in areas with more new housing and subprime mortgages, like in the suburban edge of the Bay Area. For example, in Contra Costa County the median home value dropped 36% from 2007-9 to 2010-12, while for the SF the decline was only 7%, according the US Census Dept (namelink).

            SF is more sensitive to the fluctuations of VC/IPO funding than the flux of RE funding, at least it has been for the past 20 years.

          3. That’s an outlier. During the dot com years I could see anyone with the right appearance pose as a “visionary”. As long as you could drop a few names and say a few buzz words you’d be hired by desperate noobs who didn’t want to miss out on the next web van.

            This one is so different. The ones doing great today are the techies who dug their heels in the mid-naughts.

          4. Which is the outlier: going public with only $13 million in annual revenue and negative gross margins to reach a $3.9 billion day-one market cap, like Castlight did less than two years ago? How very 1999 of them.

            Or derivatives invented in the 1990s and QE to the nth of so many central banks these days, both of which inflate asset bubbles.

            Or the unprecedented willingness of private investors to pump billions into money losing unicorns? Uber supposedly is losing a billion dollars a year in China and may be doing similar in India. Now there’s some outlierish overreach. Certainly looks more risky than the billion bet Amazon made to build out US warehouses in the dotcom, or the billions spent pulling fiber in the dotcom. They weren’t exposed to the risks of Chinese misgovernment.

            Last year the NYT anointed Elizabeth Holmes a “visionary.” Investors bid up Theranos to $9 billion valuation based more on visions than science. How very 1997 of them.

            But of course this time it is different….Keep telling yourself that, insiders tend to. Might call them “inliers”. You’re a programmer, imagine having an inner class that only generates comforting but false results: inner liers, or inliers for short.

            In one way it is different in SF: magnitude. Now SF is only riding a billion a month investment wave, and not the billion a week we had in 1999-2000, inflation adjusted.

            FWIW, the bay area computer tech industry has had many recessions, about one per decade.

            “Silicon Valley will be affected by this recession in another way.

            When Apple decided to expand its customer service and support operation, it did so in Austin, Texas, not the bay area. When it needed more manufacturing capacity, Apple headed to Colorado and Ireland. Advanced Micro Devices Inc. and Applied Materials also have expanded elsewhere.

            The message is clear: Profit-starved computer companies can no longer afford the high price of operating in the bay area. They’ll keep their corporate headquarters here, and probably their research and development, to take advantage of local universities. But manufacturing, service and support jobs are flying out of California.

            Luckily, this has not been a severe recession. If it were worse, people would stop buying computers altogether. Also on the bright side, computer companies are learning to run more efficiently, to bring products to market more quickly and to offer more services to customers. All three will help U.S. competitiveness in the long run.

            But the valley has been shaken. There will be no more business as usual.”

            That was written in 1991, after SV home prices had dropped ~20% in less than two years. I guess no one told them at Yelp about the 25-year-old lesson to put their customer service somewhere so cheap that people wouldn’t complain that get paid so little. “Those who cannot remember the past are condemned to repeat it.” But differently. this time.

  4. Or derivatives invented in the 1990s and QE to the nth of so many central banks these days, both of which inflate asset bubbles.

    lol. You spout this like it’s a fact. How are you determining what is and isn’t an “asset bubble”? And how are you then tying that back to QE as the sole (or primary or even secondary or tertiary cause)?

    1. The dotcom stock bubble and the RE bubble before the last crash were both fueled by creative and extraordinary financing and valuation schemes. If you don’t understand that, then ROFLOL.

      As I pointed out above, bay area tech has had many recessions. Neither an asset bubble nor creative financing are required. Nevertheless, I made no attempt to rank order the usual suspects or compile an exhaustive list. I don’t much care who’s on first and what’s on second….Make your lineup in whatever order you please, the rules of the game haven’t changed much, nor the skills of the players and umpires. The more interesting questions are where are we in the game this cycle, what’s the score, and who is left in the bullpen and on the bench. Show me your score card and I’ll show you mine.

      1. Agreed on your first sentence, but I’m waiting for your “fact” that this is caused by QE. There was no QE in the 90s. Derivatives, sure, that’s just a simple allowance for more leverage. We can certainly agree that more regulation to prevent excessive leverage would be a good.

        1. “simple allowance for more leverage”

          Good grief. Nice revisionist history, Even the sometime richest man in the world referred to derivatives as “financial weapons of mass destruction.”

          1. Sure, not disagreeing. That’s what excess leverage and/or “hidden” information does. Taken to the extreme levels that we’ve seen those are financial weapons of mass destruction which needs heavy regulation or banning.

            But, again. No relation to QE.

    2. anona — it is a fact, lol. QE1, QE2, QE3, Operation Twist, and ZIRP are the five well-documented, Fed-created driving factors of this asset bubble. Don’t believe me, believe the Fed’s own data.

      If you don’t trust the commie radicals at the Financial Times, there are many charts on FRED that support and expand on this. All QE/ZIRP-fed bubbles end, and that’s where we are now. You apparently subscribe to the efficient market hypothesis and don’t believe in asset bubbles, so that might interfere with your cognitive ability to understand this – I mean you bizarrely think the last seven years have been a period of “insanely tight money,” so you are truly in bizarro world: up is down, black is white, monetarism can’t fail, it can only be failed!

      Good news for bizarro world, though, because it looks like your coveted NIRP is on the way here, following Japan’s and the EU’s own desperate moves to shore up their plunging markets that have been munched by the neo-liberal market-monetarist ideology you have such faith in.

      1. I see a chart showing two things rising at the same time. Did you realize that QE1, QE2, QE3, etc are also driving smartphone adoption in Africa?!?! That’s weird!

        1. I get it, anona- nothing in economics can be proven or disproven. Very convenient for your voodoo ideology. Even your idol Greenspan admitted to a “small flaw” in his theory (it was actually a huge flaw that undermined the basis for your Milton Friedman monetarist voodoo ideology). Curiously, most post-Keynesian models predicted what happened (while the monetarists and Austrians were both very wrong).

          1. My idol? Greenspan was atrocious. You don’t seem to understand what I’d prefer our monetary policy to look like (rules based, level targeting – so overshoot when you’ve undershot in the past, etc).

          2. “rules based, level targeting ”

            i.e. “market monetarism,” which is merely a new flavor of failed orthodox monetarism. It’s putting lipstick on the same monetarist pig, it’s putting Uncle Miltie Friedman in a different dress (h/t/ to anyone who gets that). It’s using somewhat different methodology to arrive at the same ends: trying to jump-start demand-side slumps by giving institutional speculators access to huge amounts of cheap money, hoping that some meager amounts will trickle down to the grunts, instead of using fiscal policy to get aid immediately and directly to the sectors that need it. Trickle down – that’s really what your “rules based, level targeting” means. It’s an elaborate, arcane Rube Goldbergian mechanism of implementing the same failed elitist monetarist policies.

          3. The point of level targeting would be to never allow us to get to the point where demand-side slumps hurt us. The insane stomp on the brakes thinking of the Fed now is going to send us back into recession, when we should be mashing the gas until we’re at least at 4-5% inflation for a few years to make up for the 5+ years of teetering on deflation.

            It has nothing to do with “trickle down”.

          4. Note that I’m completely fine with any method being used on the legislative side to distribute income in a more egalitarian way, and definitely would prefer much more stringent regulation of the financial sector. Not exactly Friedman or Greenspan-esque views.

        2. anona, you seem to have misunderstood and are way over analyzing. I never said QE or derivatives caused the dotcom boom. I was responding to SFs’ notion that the dotcom was some outlier by providing examples of risky biz and finance actions from the post-dotcom era. Some of these actions are very like the dotcom, some new and hazardous, some less so, etc.

          An underlying point is that financial wizards brew new potions of creative destruction which magically contribute to each recession going back at least into the 1980s. In the dotcom era it was more about phantom measures of market cap to justify IPOs that should have never happened. Oh, and old time fraud, insider trading, etc.

          1. You’re responding to my response to two beer’s claim that a rise in the monetary base happened at the same time as the S&P going up, so clearly one caused the other.

            I’m still not seeing how increased leverage or financial wizardry is comparable to QE. That’s what I’m looking for – how are they similar?

          2. As Jake more or less says, derivatives and QE are two ways to create asset bubbles. Your market monetarism is dependent on the efficient market hypothesis, which doesn’t acknowledge bubbles . The concept of financial mechanisms creating asset bubbles doesn’t fit into your paradigm, so you are cognitively unable to comprehend the concept, let alone it’s different causes.

          3. sorry anona, my last post got in the wrong subthread. It was supposed to reply to your post that starts with “Agreed on your first sentence, but I’m waiting for your “fact” that this is caused by QE.”

            Anyway, plenty of economists have explanations of how QE inflates asset prices and increases leverage and risky investments. Believe them or not, but comments on a RE blog aren’t a good venue to argue econ theory.

            WRT Bay Area tech booms and busts, AFAIK they have all had multiple factors converge, usually some key technical advances, some financial creativity, some government intervention to open or fund a new market or let in a flood of foreign talent. ~90% of the net migration to SF in recent years came from other countries. As has ~50% of the net population growth of the Bay Area in the SV or tech era.

          4. I’m completely on board with bubbles created via derivatives, excess leverage allowances, inefficient governments (China over the past 10 years), etc. Bubbles caused by QE take a leap of faith that I’m not willing to jump to, because the transmission mechanism required just doesn’t make sense.

          5. Ask three people, what’s a bubble and you get three different answers! But that’s just the reality that not everything in life is clear cut.

            IMHO, what makes a bubble is when asset prices decouple from a rational basis in fundamentals and rising prices themselves fuel expectations for further price appreciation. ‘Irrational Exhuberence’, ‘The greater fool theory’ or whatever. I wouldn’t say that finance causes bubbles, more like finance is gasoline thrown onto a fire. After all, if you’re going to double your money would you rather double $1M or $2M? Why not borrow to make up for what you can’t afford? If prices on the underlying asset are sure to rise, what’s the risk to a lender? You don’t make money by not lending. Why not lower standards to increase your market share ? (e.x. BofA’s 3% down program) If you don’t lower your standards, your competitors will!

            I’d say that the issue with QE (as with what was termed ‘The Greenspan put’) is basically one of moral hazard. If there’s an implied commitment to prop up asset prices should anything happen, then it unnaturally reduces the risk of buying into assets at current price levels. And what’s a time honored way to increase the return on a low risk asset? Leverage.

          6. How in the world is QE an “implied commitment to prop up asset prices”? It’s a commitment to increase the money supply, nothing more.

            This thread has people blaming QE for the real estate bubble, when no QE existed at that time. QE is being blamed for the increase in stock prices, even though there hasn’t been some rapid increase in P/E ratios relative to historic norms over the past few years (let alone during time periods specifically where QE has been “live”).

            Has QE “caused” the Bay Area-specific VC funding orgy of the past few years? Eh…call me skeptical. It really doesn’t seem to me that the Fed should be focusing on popping bubbles to specific to one tiny region of the country, I suppose.

          7. @anon, anyone worth asking knows the dotcom and 2002-2006 RE runup were bubbles. There were signs of bubbliciousness ~2013-2014 in the tech IPOs and unicorns, with $$$$ spillover into bay area RE.

            @anona, there hasn’t been a “VC funding orgy of the past few years”, at least not by the standards of the late 1990s Bacchanalia. The Facebook and Twitter IPOs didn’t unleash the flood gates to float dozens of trash IPOs the way the Netscape and Yahoo IPOs did in the 1990s.

            FWIW, for a year plus the VCs and funders generally have been getting tougher demanding results and limiting their downside exposure. You can see this in the down rounds, such as the details in the Square IPO about their D series round; the many delayed IPOs; and the hammering of stock prices for money losing recent IPOs (twitter, linkedin, new relic,…).

            We may never go back to the pre-Internet days when a startup couldn’t go public without multiple quarters of profit, but currently we seem to have paused before going full party like it’s 1999 irrational exuberance.

            Still plenty of fundamental reasons to be exuberant, including new technologies creating opportunities. Best to keep the investment part rational, though.

            BTW, how many unicorns does it take to reach Dow 36,000?

          8. It’s important to realize that QE is not a strategy or a policy, it’s just a technique. Specifically a technique used when short term interest rates are at or below the zero bound.
            So looking just times when QE was used vs other monetary tactics isn’t looking at changes in monetary policy.
            And an implied policy of propping up risky assets when they run into trouble encourages risk taking behavior.
            As I understand the ‘market monetarist’ camp, their level targeting policy essentially picks some nominal variable (NGDP or some basket of other indicators, wages, home prices, stock values, …) and then controls the money supply to keep that variable on a pre-set growth path in nominal terms. So for example, they could decide that 5% nominal GDP growth is to be targeted, they plot out this NGDP growth path and use monetary policy to follow this prediction as closely as possible. This has some interesting potential benefits, but in some sense this is just making the implied commitment to prop up the economy explicit. In the medium term initial conditions seem to matter quite a bit under this policy. If you start off at a bubble top and level target from there onward, you’re explicitly validating the bubble top conditions. Longer term, since this policy essentially guarantees a constant growth rate, what happens if we, as a country, enact laws and policies that are pro-growth vs ones that tend to make an economy stagnate? If a company gives everyone 3% raises no matter their effort or results what kind of work do you think gets done?

          9. It’s important to realize that QE is not a strategy or a policy, it’s just a technique. Specifically a technique used when short term interest rates are at or below the zero bound. So looking just times when QE was used vs other monetary tactics isn’t looking at changes in monetary policy. And an implied policy of propping up risky assets when they run into trouble encourages risk taking behavior.

            Not sure what you mean here. If QE is just another tool for monetary policy (agreed), why is the use of QE somehow an “implied policy of propping up risky assets”. You seem to be relying on nominal interest rates a bit much? ie low interest rates must mean “easy” monetary policy already?

          10. And to answer your question on how level targeting would work – the level would be allowed to change (the specifics for how this can work are numerous). The important piece is that we have a guarantee that allowance will be made for catch up NGDP growth (higher inflation, in other words) after a time of slow growth.

            The Fed now is capping us at a low rate of growth (based on the tightening of policy in December) rather than allowing any chance for catch up growth.

          11. That’s why I lumped it in with the ‘Greenspan put’. The point being that the expectation of a central bank bailout existed even prior to QE.

          12. Sure, but that’s just a part of any fiat money regime, nothing specific to QE. Before we had the possibility of a “new gold source ‘found’ put”.

          13. “Sure, but that’s just a part of any fiat money regime, ”
            Not really. The key is what is being targeted via monetary policy. Is the target just stability of the currency or are asset values or some other growth based variables being targeted.

      1. I’d be interested in what Jake says. I classify it under “In search of yield”. This round may not have Big Money financing little guys with several layers of fraud in between. In a similar vein, like the unicorns, no IPO needed.

        1. Though an interesting thing to look at this time around is the rise of non-bank lenders in the mortgage market and just exactly what their internal controls are and what regulations they are subject to. Quicken loans in particular has expanded rapidly and is the subject of a DoJ investigation.

    1. There’s another example of new money chasing small returns. They paid $725K and sold it 6 mos later for $860K? Even with the East Star products in the kitchen and bath they would be lucky if they cleared 50-60K after labor and closing costs. I mean, more power to them, but this is a marginal example of Real Estate money-making in SF…

      1. From what I can tell, Eagle Vista Equities LLC is nationwide (in select locales). They’re in the East Bay as well.

        1. Bank of the West does most of the financing on Eagle Vista property flips. Not saying anything will go wrong, but if it does, you read it here first…

      2. I counted 16 Trustee Deeds since they’ve been buying properties in Ess Eff (slightly more than a year) and 14 in Alameda County.

          1. What’s not to love about financial innovation for a more efficient marketplace? What they’re doing, while not cutting edge, was pioneered after the last collapse, so it’s not clear if it’s a sustainable enterprise or a short term niche scheme that only works during an accelerated growth phase. They came to my attention as they bought this place on the open market for $175k over asking ($1million). They remodeled the kitchen, bathrooms and put in some new windows. It sold for $1.250 million. Oh, and permits show that the buyers had to put on a new roof (how’s that for savvy upgrades — don’t do more than is necessary).

          2. I can’t really tell if when you say, “What’s not to love about financial innovation for a more efficient marketplace” you’re being cheeky. I mean, pretty much every Wall Street structured product that lead up to 2008 was at the time labeled financial innovation. They didn’t all end well.

            Again, more power to Eagle Whatever, but chasing small margins on MLS-listed deals for low budget flips hardly constitutes anything very clever IMHO. Eat like a bird, defecate like an elephant when something goes wrong.

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